The Future Lies in Decentralized Cryptocurrency Exchanges

06 06 2018 / 11:35

More than 900 ICOs appeared during the 2017, which altogether gained $5.6 billion. But nearly the half of ICO tokens launched in 2017 have almost completely lost their value today, and authority structures like the U.S. Commodity Futures Trading Commission attentively surveil ICOs now.

Back in the late 2017 cryptocurrency market was burgeoning, society was excited by the new phenomenon and ICOs were thriving. More than 900 ICOs appeared during the 2017, which altogether gained $5.6 billion. But nearly the half of ICO tokens launched in 2017 have almost completely lost their value today, and authority structures like the U.S. Commodity Futures Trading Commission attentively surveil ICOs now. In December 2017, the popular cryptocurrency exchange Bitfinex was summoned to the court by the CFTC, and various governmental agencies across the world desire to find approaches to cryptocurrency space.

The Centralization of a Decentralized Technology

Despite the paradoxical sense of the title, it perfectly characterizes the situation of the cryptocurrency market. When Satoshi Nakamoto had been developing his Bitcoin idea, he envisioned system decentralization as the main trait of his invention. But today many people used to use services like Binance and Coinbase to work with crypto, which, in fact, provide centralized exchange. Initially, Bitcoin creator wanted to put the financial power away from the banking corporations and into the hands of ordinary people, but nowadays it looks like exchanges have occupied the role of banks in the cryptocurrency space.

There is another obstacle with centralized exchanges – you do not actually own any cryptocurrency or fiat as long as it is on the service. It is only the matter of trust until you actually withdraw the funds, which creates certain risk while holding your assets on exchanges. For some people, this situation has led to loss of investments due to government shutdowns of crypto exchanges. There is a possibility of hacker attacks as well. The most notable case happened with Mt.Gox, but other serious exchanges like Bitstamp, Bitfinex and Coincheck have also lost substantial amounts of funds due to security breaches. There even were incidents when exchanges stole its customers finances (BitGrail), or became the targets of market manipulation (OKEx).

Decentralized Exchanges Are Here

Meet the DEXs - decentralized exchanges, who might be the resolution for the named problems, which occur to users on centralized platforms. Decentralized exchanges rely on smart contracts to track and conduct the trades, which eliminates the involvement of third parties into the process, as users don’t need to deposit their funds to a centralized platform. This gives a power to have a full control of the crypto exchange process. If the smart contracts are written correctly, DEXs could provide more safety than their centralized rivals, as hacker’s attacks on the main exchange wallet become impossible. As follows, decentralized exchanges do not demand too much verification and provide more safety and privacy for their users.

In recent years, several DEXs arrived on the market of crypto. Some of them work only with Ethereum users, for example, EtherDelta and 0x, and others support broader variety of altcoins, such as CryptoBridge and Bisq. Day by day we’re closer to encounter the first decentralized exchange developed by a centralized exchange company – there are evidences that Binance and Bitfinex are about to employ decentralization. What is more, much is expected from the NEX decentralized exchange, which will begin their ICO token sale this month.